USA pending home sales fall slow New NAR data shows

USA Pending home sales slow modestly in August but agreement signings remain at their 2nd highest level over the past year, according to the newest data from the National Association of Realtors. All major regions experienced decline except for the West, which rose for the 4th consecutive month.

Overall the index fell 1% to 104.7 in August from 105.8 in July, and is at present 2.2% below August 2013 when it was 107.1. In spite of the slight decline, the index is above 100, considered an average level of contract activity, for the fourth consecutive month and is at the second highest level since August last.

That contract signings are holding steady and fewer distressed sales and less investor activity is likely behind August’s modest decline. Said Lawrence Yun, chief economist of NAR.

Fewer distressed homes at good deal prices and the acknowledgement we are entering a rising interest rates environment likely caused indecision among investors last month. With investors pulling back, the market is shifting more towards traditional and first time buyers who really on mortgages to purchase a home, he added. 

According to NAR Profile of Home Buyers and Sellers, some 81% of first time home buyers in 2013 who finance their purchase obtain a conventional or Federal Housing Administration loan. Overall, first time home buyers have been less common from the housing recovery, representing less than a third of all buyers all month for the past 2 years.

Yun pointed out that first time home buyer participation should step by step improve despite tight credit condition and the inevitable increase in rates. The employment outlook for young adults is brightening and their incomes lastly appear to be rising.

The PHSI in the Northeast slipped 3% to 86.5 in August, but is still 1.6% above one year ago. In the Midwest the index fell 2.1% to 102.4 in August, and is 7.6% below August 2013. 

The South decreased 1.4% to an index of 117 in August pending home sales, no changed from one year ago. The index in the West rose for the fourth consecutive month by 2.6% to 102.1, but still remains 2.6% below August 2013.

Accessible home sales are predictable to be stronger in the second half of the year behind better inventory conditions, continuously low interest rates and slower price growth. 

Overall, Yun forecasts existing homes sales to be down 3% this year to 4.94 million, compared to 5.09 million sales of existing homes in 2013. The national median existing home price is probable to grow between 5% and 6% this year and 4% and 5% next year.